Fab Investment Outlook and The Surge of China
Shanshan Du
Senior Analyst
SEMI China
June 2018

Outline• 2018 Outlook and Drivers• Fab Investment Outlook– Record spending• The Surge of China– New fab projects– Capacity projection– Memory and Foundry• Summary2018 Outlook and Drivers

3

Semiconductor Industry Outlook
2017 soars past $400 billion

$400B

$450

Semiconductor Revenue($US Billion)

$400
$350

$300B

$300
$250

$200B

$200
$150
$100
$50

Source: SIA/WSTS historical year end reports, WSTS 2018 Forecast

2017

2016

2015

2014

2013

2012

2011

2010

20092008

2007

2006

2005

2004

2003

2002

2001

2000

19991998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

$0

2018 Semiconductor Forecasts
Future Horizons (Jan 18),
21.0%

Cowan LRA (Apr 18),
16.8%
IC Insights (Mar 18), 15.0%

WSTS (Feb 18), 9.5%
VLSI Research (Jan 18),
7.7%
Gartner (Jan 18), 7.5%

IHS Markit (Jan 18), 7.4%
Semico Research (Jan 18),
7.2%
0%

5%

10%

15%

20%

25%
Source: SEMI April 2018

Industry Trends and Growth Drivers• Numerous Applications Driving Growth Through 2025
Applications

Largest Growth Products in 2017

StorageMemory(DRAM due to strong pricing)Long Term Forecast to 2025

IndustrialSensors
Wireless

Opto Electronics

Automotive

Analog Devices

ConsumerDiscretes

IoT *$16B -> $62B

Automotive*$32B -> $51B

5G **

$0B -> $20B

AR/VR***$4B -> $131B

AI***$5B -> $50B

• Robust volume shipments and higher ASPs for Memory are driving strong 2017 revenue growth.

• Storage, industrial, wireless, and automotive applications also contributing to strong 2017 growth.
• Connectivity, data centers, communications, automotive, and advanced software spurs strong demand through 2025.
* Semiconductor value** Network/Devices*** Market SizeSource: SEMI Industry Strategy Symposium, 2017

Copyright © 2017 SEMI®. All Rights Reserved

Virtual Reality (VR)Augmented Reality (AR)AI Artificial Intelligence (AI)Global Fab Investment Outlook

740% Increase in 2017

Fab Investments
Growth is likely to continue beyond this year
Equipment Spending over Time

US$ Million$70,000

China$60,000$50,000

Samsung$40,000$30,000$20,000$10,000$0
2015

Americas

2016

2017

Europe & Mideast

Japan2018

SE Asia

2019

Taiwan2020

S. Korea

China

Source: SEMI World Fab Forecast, March 2018

Fab Spending by Product Types
Led by Memory and Foundry

Capacity Trend by Product Types
3D NAND, DRAM, Foundry and MEMS add more new capacity
Type2018

2019

3D NAND

46%

20%

DRAM

5.5%

5.7%

MEMS

7.8%

3.8%

Foundry

5.4%

3.5%

Analog &Power

4.1%

3%

Logic &MPU

4.5%

3%

China Investment

12China’s Domestic IC Industry
Undergoing Dramatic Growth•

Total revenue reached $83.1B•

YtY growth rate is 27%

Source: CSIA, SEMI China, April 2018

Fab Equipment Spending by Region

China to become Top 2 Spender in 2018/20192015 FAB EQUIPMENT SPENDING
US$36 BILLION

2018 FAB EQUIPMENT SPENDING
US$63 BILLION

Americas14%

Taiwan16%

Taiwan
26%

China
13%

SE Asia
3%

Americas12%

SE Asia
3%
China
20%

Europe &Mideast
6%
Europe &Mideast
7%

Korea
32%
Korea
23%

Japan
15%

Japan
10%
Source: SEMI World Fab Forecast, December 2017

New Fab Projects on the Rise - China leads the way• 19 new fab projects inChina from 2017 on• Out of 10 upcoming
300mm projects in China,
Majority (7) are from
China-owned entities

Surging China Fab Investment – Foundry & Memory Lead
Key Spending Projects
2017$USD (Million)••••

Intel Fab 68 - upgrade to 3D NAND
SK Hynix C2
UMC Fab 12X
SMIC B2?

2018
•••••
•

Intel Fab 68 Phase 2Yangtze Memory Technology (Wuhan)
TSMC Nanjing Phase 1
Globalfoundries Chengdu Fab 11
Hua Li Micro Fab 2
Fujian Jin Hua - DRAM

2019/2020

Source: SEMI World Fab Forecast, December 2017

• Tsinghua Unigroup (Nanjing) andSamsung Xian phase 2• SK Hynix C3• SMIC new Shanghai fab• Hefei Chang Xin Memory16

The Rising Share of China Capacity
Strong growth from 2016 to 2020
8” WPM (Thousand)Disclaimer: The forecast is based on current announcement and issubject to change depending on actual execution.

Source: SEMI World Fab Forecast, December 2017

Capacity Trend in China
Foundry, Memory and Discrete (LED) Fuel the Growth
8” WPM (Thousand)Disclaimer: The forecast is based on current announcement and is subject tochange depending on actual execution.

Source: SEMI World Fab Forecast, December 2017

Memory Capacity in China
3D NAND showing stronger momentum
China Memory Capacity Forecast

300mm WPM (Thousand)(300mm K wpm)

2016

2017

2018

2019

2020

2021

386

397

315
281
242
196
178
140130

134

172
141

DRAM
Disclaimer: The forecast is based on current announcement and is subject tochange depending on actual execution.

NAND FLASH
Source: SEMI World Fab Forecast, December 2017

China Momentum and ChallengesMomentum▪ The surge of China investment is both policy-driven and marketdriven.
▪ Policies such as the National IC promotion Guidelines (2014) as wellas the 13th five-year plan (2016-2020) are the key drivers of the new
fab projects blossoms across the country.
▪ Majority of these new fab projects are supported or “invested” by
National IC fund and various local government funds.

▪ The huge demand and rising Chinese electronics OEMs also play
an important role in attracting foreign semiconductor companies to
set up facilities in China.

China Momentum and Challenges
Challenges▪ There is no shortage of capital for semiconductor fab projects inChina. Though some local government funds are not really ready yet.
▪ Two major limiting factors are the availability of talent and the sourcesof technologies/IP.
▪ Talent sourcing is happening across Asia especially from Korea,Taiwan and Japan.
▪ However, talent recruiting raises some concerns about IPinfringement especially in memory.
▪ The concerns of adding massive capacity in certain productcategories may trigger oversupply in the long run.
▪ China faces regulatory challenges to successfully complete outboundM&A in tech sectors.

Summary22

Summary
Fab Investment• Record spending in 2017 and 2018
• 3D NAND, DRAM, Foundry and China investments are keydrivers to spending
The Surge of China• 19 new projects planned from 2017 onwards.
• China is forecasted to become the largest capital equipment
market in 2019
• Investment in foundry and memory segments are paving the wayfor China’s place on the global semiconductor stage.

POLICIES – ECOSYSTEM – INVESTMENTS - CAPACITIES• New Expanded Edition Coming inSeptember, 2018
• Segmented Market Details• Supply Chain Database• Forward Analysis with• Opportunities and Challenges

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